Boies Schiller Asks Bankruptcy Court To Let It Be SCO's Special Litigation Counsel

Friday, October 12 2007 @ 06:34 PM EDT

The formal notice [PDF] that SCO wants Boies Schiller to be its special litigation counsel has now been filed. It wishes to be appointed to handle going forward: the arbitration in Switzerland, SCO v. IBM, SCO v. Novell, Red Hat v. SCO, SCO v. Autozone, SCO v. DaimlerChrysler, and Wayne R. Gray v. Novell, Inc., The SCO Group, Inc. and X/Open Company - that's another Daniel Wallace-type of skirmish only about a disputed domain name.

What a list. So, SCO, how's it working out for you, suing Linux? May it be equally successful for any patrons and imitators.

Any objections must be filed and received by the Bankruptcy Court by 4 PM on October 29th. If anyone objects to Boies Schiller's appointment, the matter will be added to the hearing agenda for November 6. It's SCO's funeral, and if they are happy, why would anyone else care if Boies Schiller represents them? Well, there might be creditors, like Novell for example, or the US Trustee even, who notice that SCO's money has been funneling down a legal rat hole, and they might not want such a pricey firm to continue. Boies Schiller says it's working for contingency, expenses, and in a couple of matters, such as in the arbitration, for 50% of its regular fee, although it doesn't say what that regular fee might be. And of course SCO still has to cover the firm's expenses. Like flying to Switzerland. So when do you say, enough is enough? A trustee might think that since SCO also is paying a Swiss firm to represent it in the arbitration, perhaps that might be enough for a firm filing for Chapter 11 bankruptcy.

But then, that's just me. I'm thrifty by nature. For all I know no one will object, and this will be rubber-stamped. But Stuart Singer, in his declaration in support [PDF], reveals that in the last year prior to SCO filing for bankruptcy, SCO has paid them $887,523.55. There might be some who would view that as Novell's money, if SCO claims that it already spent all the Sun and Microsoft agreement monies from 2003. I can imagine Novell wanting it back.

And don't forget that in Darl's Declaration in Support of First Day Pleading, he stated that SCO wanted BSF to continue to represent SCO in all the usual litigation, but he also listed that they would handle "adversary proceedings" which is a term I associate with bankruptcy proceedings. Some of us, watching the SCO saga, may have concluded that Boies Schiller has managed to drag out this litigation longer than another law firm might have, and it could be that some creditors would prefer that not happen in the bankruptcy. Just saying. The day SCO filed for Chapter 11 protection, it listed a debt to BSF of another $287,256.39, which Singer indicates is owed for expenses. If the firm gets what it says is owed, that's $1,174,779.94. A million dollars is a lot of money when you've failed across the board, as SCO pretty much has. I know. There's an appeal. Well. Maybe. Someday. But even with that, some might argue that at a certain point, you need to stop the bleeding and at least get into a reduced spending mode. And the thing about bankruptcy is, you can't control how you spend your money any more. You have to persuade the court that it should be spent the way you want it to be. And that is what Mr. Singer's declaration is trying to achieve.

First, we learn from the Singer Declaration, the arrangement that SCO and Boies Schiller signed revising the agreement in October of 2004, attached as Exhibit A, meant that from then on Boies Schiller paid the other lawyers, like Kevin McBride and Berger Silverman. SCO paid expenses. In the arbitration, Boies Schiller agreed to represent SCO at half the normal rate but all expenses were to be covered by SCO, including paying the Swiss lawyers. But Boies Schiller would like a change in the terms, a change not noted in the Notice but only in the Declaration, paragraph 7:

7. BSF has consented to continue to provide such services to the Debtors on the terms set forth in the Engagement Agreement (with one modification noted below) with respect to the matters covered thereunder, and on the same basis it had represented Debtor pre-petition with respect to the SuSE Arbitration and Gray Litigation. For example, under the contingency fee provisions of the Engagement Agreement, Debtors would pay the Law Firms 33% of any recovery up to $350 million "less all hourly fees paid at any time to the Three Original Firms." BSF has consented to be engaged to continue providing professional services in these matters on the terms set forth in the Engagement Agreement, except as the sole remaining of the three Law Firms continuing to provide servers, it requests that it be entitled to the full contingency fee payable to the Law Firms (except for such amount, approximately 7.5%, to which Kevin McBride currently holds interest).

8. Prior to the Petition Date, BSF paid fees to Hatch, James, and Dodge (Utah local counsel) and Dorsey & Whitney (with respect to intellectual property assistance only), and will continue to be responsible for such fees, for work authorized to be conducted in connection with the SCO Litigation. Upon disclosure and any necessary court approval, BSF may seek to share part of its contingency interest with the other firms that it is required to compensate under the terms of the Engagement Agreement.

Is that clear to you? Will they share or won't they? I take it they won't unless they come back to the court and get an order. Good luck, other law firms.
To hear BSF tell it, it has no conflicts representing SCO:

9. BSF represents no interest adverse to the Debtors or their estates with respect to the matters upon which BSF is to be employed. BSF is currently representing the Debtors with respect to each of these matters, and there has been no suggestion that BSF represents any interests adverse to the Debtors in connection with these matters. BSF is a creditor with respect to certain amounts for fees and expenses outstanding at the time SCO filed its Chapter 11 petition. In the one-year preceding the Petition Date, according to BSF records, BSF has received payments from SCO in the amount of $887,523.55.

The other filing is apparently a pro se thing of some kind from a security holder. Here's the first rule it invokes, and the second. I'm not aware of any security holder committee having been set up yet, but that doesn't mean it hasn't happened and I just don't know about it.